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DUBAI (Reuters) - Iran will continue enriching uranium "with intensity", with the number of enrichment centrifuges it has operating to increase substantially in the current year, the country's nuclear energy chief was quoted as saying on Wednesday.

The comments by Fereydoun Abbasi-Davani, the head of Iran's Atomic Energy Organisation, signalled continued defiance by Iran in the face of international demands that Tehran halt enrichment to the higher 20 percent fissile purity level, close down its Fordow enrichment plant, and ship out its stockpile of the material.

Diplomacy between Iran and the world powers - the United States, China, Russia, France, Germany, and Britain - has been deadlocked since a June meeting that ended without any breakthrough.

Iran has faced a tightening of Western trade sanctions in the last two years, with the United States and its allies hoping the measures will force Iran to curb its nuclear programme.

"Despite the sanctions, most likely this year we will have a substantial growth in centrifuge machines and we will continue (uranium) enrichment with intensity," Abbasi-Davani was quoted as saying on Wednesday by the website of Iranian state television (IRIB).

The Iranian calendar year runs to mid-March.

But Abbasi-Davani did not say whether Iran would increase the work that most worries the West, the higher-grade enrichment of uranium to 20 percent purity, as opposed to the lower-grade enrichment to 3.5 percent level needed for nuclear power plants.

Iran says it needs 20 percent enriched uranium to make fuel for a medical research reactor, and argues its nuclear programme has purely peaceful purposes.

Iran started producing 20 percent-enriched uranium at the Fordow site, buried deep inside a mountain, in late 2011 and has been operating 700 centrifuges there since January.

A U.N. report earlier this month said that the Islamic state has put in place the nearly 2,800 centrifuges that Fordow was designed for, and is poised to double the number of them operating to roughly 1,400 from 700 now.

U.N. nuclear watchdog chief Yukiya Amano said earlier this month that Iran is enriching uranium at a constant pace and international sanctions aimed at making Tehran suspend the activity are having no visible impact.

Abbasi-Davani also said on Wednesday that the Arak research reactor, which Western experts say could potentially offer Iran a second route to material for a nuclear bomb, faced "no problems" and was progressing as normal, IRIB reported.

A U.N. report this month showed that Iran has postponed until 2014 the planned start-up of the Arak research reactor, which analysts say could yield plutonium for nuclear arms if the spent fuel is reprocessed.